It is an unfortunate truth in life that debt piles up whether we want it to or not. Home loans, mortgages, college and student loans, bills, emergency bills: they all pile up, often straining a budget that might already be plagued with other payments such as rent, taxes and groceries.
Once you get in debt, it might seem almost impossible to get out of it, since you’re paying all of your money to pay off your debt; you won’t really have any money in case something unexpected happens such as faults arising with your car.
So how do you get out of debt? Actually there are multiple methods using debt management techniques such as loan consolidation, debt reduction and even paying more on your bills. Here are five easy tips that anyone can use to become debt free more quickly.
Balance Your Check book
While you don’t have to refrain from ever having fun, or purchase only the cheapest things in the grocery store, it’s a great idea to balance your check book so that you know what you’re spending and where. Budget your food, clothing and entertainment shopping bills so you know what you can spend when you want to make a purchase.
Pay More than You Owe
Did you know that the longer you are in debt, the more you owe, even if you pay your bills regularly. Interest adds up and some bankers and loan companies charge a lot of it. You might find that over thirty years, your interest can build by as much as 30% of the original loan.
Your only way to fight back is by paying more than you owe for the bill. If you have any extra money for the month, put it towards paying back your debt. You’ll be surprised at how much faster you pay off your debt and how much less you will owe in interest.
For example, let’s say you owe £40,000 with a 2% interest rate. If you’re paying £400 per month, you will take 100 months to pay it off. With 2% interest, you’re paying an extra £800 a year, meaning that 2 of each of your monthly payments go to interest; you’ll end up paying an additional £6,800 more on your loan.
By increasing the amount you pay to £500 per month, you’re only taking 80 months to pay it off, which reduces your interest, as well as your time in debt.
Pay off Smaller Bills First
So you’re paying more than one bill that you owe. Let’s say you’re paying your college loan off, but you’re also paying for a TV you bought on credit. Because both of these items are a drain on your monthly budget, the best idea is to pay off the smaller bills first so that you can get them out of the way, and move on to paying off the bigger bills.
The fewer bills you have, the less stressed you will be, even if one of those bills was very small. This works with relatively larger bills as well, simply focus on paying off the smaller item first, so that you can have more money later to pay off the larger one.
Debt consolidation is one of the best debt management tools for anyone with a large number of debts. Generally the process works by having a debt management company make a deal with your creditors so that you can pay the consolidation firm one monthly payment.
Some additional features that might come with debt consolidation include debt or interest reduction. Most people find that debt consolidation gives them the freedom to pay one bill, rather than being pressured into paying multiple bills with multiple points of interest. Generally the deal saves on interest, reduces stress and you can still choose to pay more than you owe to pay the debt off more quickly.
There are many ways that you can improve your chances of getting out of debt more quickly. Remember that the higher your debt and the higher your interest rate, the longer it will take to become debt free. Some options to look into include debt consolidation, loan reconciliation and if your interest is very high, taking out a lower interest loan to pay off your high interest debt.
This is a guest post. Bob Emerald writes for a living and has written about debt management for a multiple websites as well as several local magazines in the United States. He aims to help you manage your debt and stay in the clear, even when times are hard.
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